A commercial leader or the CEO either at a big company or at a small one, faces the challenge of deciding where to invest first and in which proportion: building a strong sales team or a strong marketing team.
How to decide?
The decision is not easy and there is not one-fits-all solution, however a few pointers for extreme cases can be analyzed.
But first,
What is the difference between sales and marketing?
Marketing is awareness generation; it is everything that happens before the customer comes to the company with a request.
Sales is what happens after that, once the lead has been received and there is a company/person that is interested in buying what is offered.
Here lies the first misconception, because sales are perceived as not in charge per se of generating leads, many commercial leaders and CEOs think that the first step is to create a very strong marketing team that can fill the funnel of leads so then salespeople can convert into revenue.
The hard truth about this is that this may take too long or never happen. Therefore, sales teams must be also responsible for lead generation, since even when that is less effective and more expensive, it is much faster.
The right proportions
The proportions on how big a sales team needs to be respected to the marketing team would depend on the size of the company, the product/service sold, and the customer journey (how does the product/service gets to the customer, how much the customer pay, and the availability of such).
Another aspect to consider is how fast the product/service can be delivered and if the sales team would put the production team at risk, considering that the capacity may be at limit.
Sales and Marketing in Robotics
As described in other articles, at crossing the chasm with a proven MVP, the most important aspects to have enough customer feedback. That feedback will come mostly from a good relationship between the company and the customer. To establish those relationships, a strong sales team is required.
The problem with this approach is that if done too long like that, it becomes very ineffective, since growth is only driven by investing on people, that may be also very ineffective and expensive. Therefore, also a small marketing team is required to generate the awareness needed, so then the marketing funnel can be filled, and the sales team requires less effort at prospecting.
Especially in robotics, the efforts on awareness not only require the company to provide solutions to be known and understood but also the solutions may need to be explained to customers that have never used robots before.
Rule of thumb
Since marketing expenses are different to the sales expenses, it is not a matter of number of employees only. Marketing expenses are more related to the resources required to carry out the strategy properly, while in sales it is rather related to travel expenses and salaries.
The actual numbers will depend on the cost per lead, conversion rates and customer lifetime value. Those three parameters are unique for the company in the market it is active.
As an example, a company that has a cost per marketing lead of 300 USD, means that for each lead it is required to spend 300 USD, this is typically based on a statistic that takes a certain number of leads into the analysis , meaning that there is a minimum expense to realize in order to get to that value.
The conversion rate of those leads is 1% for customers to achieve a CLTV of 500.000 USD. This means that from 100 leads, one lead will convert into a business that is in total half a million dollars. With a gross margin of 40%, that means a Return on Investment of 8 times the invested marketing money.
The interesting aspect of this is the cost of execution per profit.
How many salespeople are required to process that revenue?
This is measured by the cost of execution (sales team salary), with respect to the profit they make. So, if with 1 salesperson, 100 leads can be processed, and that salesperson get 100.000 USD at year, the profit is 2.5 times the cost of execution, which very good, if the salesperson could do all this in a year. The reality is that this normally takes 2-3 years, and so the numbers are not that good any longer.
The rule of thumb observed here, of 1/3 expenses on Marketing and 2/3 in Sales of the Sales and Marketing budget is a good idea.
Most important is always to analyze all these metrics and maintain a clean track of them in a dashboard to make sure to act upon those that are beginning to change.
Healthy Conversion Rate
The conversion rate is normally higher at sales created leads, given that they are already pre-qualified.
Therefore, a combination of marketing qualified leads and sales leads is a good idea, especially on the first years of the company.
A good conversion rate in robotics is above 1%, but the reality is that the conversion rate from lead to full deployment is never above 5%, being anything in between a healthy conversion rate that does not only depend on Sales & Marketing but also on Product Management.
